TaxTMI 
TaxTMI 
2024 (7) TMI 1693
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....sessee is in the business of providing transportation, consultancy, commission and warehousing services. The Assessing Officer observed in the assessment order that the case was selected for the reason that "Large payments made under section 194C to persons who have not filed return of income". During the assessment proceedings, the Assessing Officer observed that assessee has made payments of Rs. 4,67,39,654/- towards contract expenses and deducted TDS u/s 194C of the Act on the amount of Rs. 3,26,70,838/-. He further observed that the person to whom the payments were made failed to file the return of income. Therefore, certain details were requisitioned from the assessee, however, the assessee failed to provide the same. In view of non submission of the details as called for, a notice was issued dated 03/12/2019 calling for information. 4. In response, assessee filed letter dated 05/12/2019 and submitted that the liability of the assessee is only to deduct TDS as per the provisions of Income Tax Act, 1961, therefore the assessee fulfilled his duty. The payee filed the return of income or not, it is not the concern of the assessee in any manner. After considering the submission....
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.... 1 to 5 contains lease deed entered by the appellant with various vendors, the annexure 6 contain Invoices raised by the appellant and the Annexure 7 contains the details of warehousing charges paid by the appellant to various parties. The Annexure 8 contains details of TDS deducted and deposited u/s. 194C of the Act. In these details, the appellant has given expenses of Rs. 58,72,996/- covered u/s. 194C of the Act giving the PAN, name of the party with address, nature of expenses, amount and TDS deducted. Apart from these details the appellant has not furnished any details of the contract expenses covered u/s.194C of the Act. It is seen from the assessment order that the total expenses covered u/s. 194C of the Act is at Rs. 4,67,39,654/-, whereas the appellant has furnished the details of expenses covered u/s. 194C of the Act of Rs. 58,72,996 only. It is very much evident from the details submitted by the appellant on 29/11/2019 that the Assessing Officer has called for the details of expenses covered u/s 194C of the Act and the appellant has not furnished the complete details. During the appellate proceedings, the assessee was given sufficient opportunity to furnish the submissio....
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....e genuineness of the expenses which is covered for deduction of TDS u/s. 194C of the Act by furnishing the name of the party to whom paid, their PAN, amount and nature of expenses. If these details were submitted during the assessment proceedings, the Assessing Officer could have carried out appropriate enquiry regarding the genuineness of the expenses. It appears that the assessee has deliberately not provided the details during the assessment proceedings as well during the appellate proceedings to avoid any further verification. In the circumstances, the ground raised by the assessee that the entire addition made u/s. 69C of the Act be deleted is not acceptable.. 8.4 It is seen from the Paper Book that the appellant has provided the details of TDS deducted and deposited u/s. 194C of the Act in respect of expenses of Rs. 58,72,996/-. In these details, the appellant has provided the name of the party, address and PAN and therefore, it was incumbent on the Assessing Officer to verify the genuineness of the expenses by issuing summon or notice u/s. 133(6) of the Act to these parties. However, the Assessing Officer has not carried out any independent enquiry regarding the gen....
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....he fact that the Ld. AO had failed to bring on record any evidence to prove that the payment was made to bogus parties. 6. That on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the disallowance made by the Ld. AO despite the fact that the Ld. AO had failed to mention as to which parties had not filed their returns which the Ld. AO seemed to consider as bogus transaction bogus parties. 7. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the disallowance made by the Ld. AO, for the reason that the persons to whom payment was made are non-filers of return despite the fact that payment has been made through banking channels and is backed by invoices. 8. That the penalty proceedings initiated under section 271AAC of the Act are invalid. 9. That on the facts and circumstances of the case and in law, the Ld. CIT(A) have erred in sustaining the interest u/s 234A, 234B, 234C and 234D of the Act. 10. That the grounds of appeal are independent and without prejudice to each other." 7. At the time of hearing, the Ld. AR submitted elaborately before us and al....
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....icity of the expenditure and returned a finding that the expenditure was not authenticated by supporting evidence, the genuineness of the payments made to the parties was not established, payment were made to bogus parties and consequently, the expenditure was disallowed as unexplained expenditure under Section 69C of the Act. The source of such expenditure or part thereof is not in dispute. What is in dispute is the genuineness of incurring the expenditure. In the absence of any allegation towards unexplained source of expenditure, Section 69C does not apply at all. 4. NO DEFECT POINTED OUT IN BOOKS. BOOKS NOT REJECTED AND GROSS PROFIT ACCEPTED: i. The books of account of the Assessee have not been discarded nor has any defect been found. ii. Nowhere has it been found that Assessee has made purchases outside the books; iii. The entire finding of the Ld. AO and the Ld. CIT (A) hinges upon the fact that the expenses under consideration are paid to bogus parties and the genuineness of the expenditure is in doubt without even appreciating that if the source of expenditure are from the books and through banking channel, then how such expenditure can ....
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....aterial to show that the appellant Incurred expenses out of books of account. The only material on the basis of which he made addition u/s.69C was the valuation report...." 5.... In the aforesaid facts, the Tribunal held that in the absence of any material being brought on record to show that the valuation done as on 31.3.2009 is incorrect, no occasion to apply Section 69C of the Act can arise. The Tribunal further holds that Section 69C of the Act would not be applicable to the facts of the present case as there is no evidence of any unaccounted expenditure. The difference was only on account of estimation of the value of Work in Progress by the site engineers in November, 2008 and actually arriving at the value on physical verification which is reflected in the return of Income as on 31.3.2009. In the above circumstances, no occasion to apply Section 69C of the Act would arise. 7... In the aforesaid facts, unless it is first established by the Revenue that there is unexplained expenditure, no occasion to apply Section 69C of the Act can arise. The Revenue has not challenged the concurrent findings of the CIT (A) as well as of the Tribunal that the Work in Progre....
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....uch expenditure or part thereof", or the explanation, if it is offered by him, is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Thus, the focus of Section 69C is on the "source" of such expenditure and not on the authenticity of the expenditure itself. It Is an admitted position that the expenditure was shown by the assessee in its regular books of accounts and it is because of this reason that the Income-tax Appellate Tribunal had observed: "As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of Section 69C are not applicable as there was no unaccounted expenditure." 6. What the Assessing officer attempted to do was to go into the authenticity of the expenditure and he returned a finding that the expenditure was not authenticated by vouchers and consequently, he added the said expenditure as unexplained expenditure under Section 69C. We are in agreement with the observations and findings of the Commissioner of Income-tax (Appeals) as well as that of the Income ....
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....he books are unexplained or outside books of account, is very difficult proposition to accept. Because the quantitative details of stock, purchases, sales have not been discarded or any defect has been found, then purchases as debited in the books of accounts cannot be added u/s 69...... If all the entries in the truding account including the quantitative tally of purchases, opening stock, sales and closing stock are found to be correct and no discrepancy has been found, then no addition on account of unexplained purchases can be made, because nowhere it has been found that assessee has made purchases outside the books. The entire finding of the Ld. CIT (A) hinges upon the fact that there was material indicating purchase under consideration are bogus without even appreciating that if the source of purchases are from the books and through account pavee cheque, then how such purchases can be treated as un accounted. Since gross profit rate and gross profit has been accepted including the trading account then no such addition can be made. In the result on merits addition made by the AO is deleted and consequently assessee's appeal is allowed." g. BABCOCK POWER (OVERSEAS P....
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.... can be made under Section 69-A of the Act. 17. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "It is clear that under the provisions of Section 68. the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. 18. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the TANVI entire order of the Tribunal stand vitiated in law." Hence, from the aforesaid, it is clear that the addition made as unexplained expenditure is not sustainable in law and the Hon'ble Income Tax Appellate Tribunal cannot change the section to tax it under any other provision of the Act. This is as per the....
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.... of the CIT(A) order 3. The CIT(A) by only looking at the first page of the annexure where total details of payments amounting to Rs. 58,72,996 on which TDS under section 194C was deducted allowed expenditure of Rs. 58,72,996 out of total expenditure of Rs. 4,67,39,654/-. He failed to even look at the entire annexure where total details of payments amounting to Rs. 3,26,70,838 on which TDS under section 194C was deducted was given. III. GROUND NO. 5. 6 AND 7: NON APPLICATION OF MIND BY THE LD. AQ Without prejudice, the Ld. AO had failed to bring on record any evidence to prove that the payment was made to bogus parties. The Ld. AO had failed to mention as to which parties had not filed their returns which the Ld. AO seemed to consider as bogus transaction bogus parties. 8. On the other hand, the Ld. DR submitted that the case of the assessee was selected for scrutiny mainly on the basis of large amount of TDS deducted u/s 194C of the Act and none of the deductees have filed their return of income. Since, none has filed their return of income, the assessee has not proved the genuineness of the transaction. In this regard, he brought to our notice findin....
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.... assessee, the assessee has to give sub-contracts to various parties to render the services of logistics and carry on the business of end to end services. The assessee has made payment of Rs. 46,73,39,654/- to various parties and deducted TDS on the amount of Rs. 32670838/- u/s 194C of the Act and rest of the amount, the assessee has not deducted TDS as the same are not required to be deducted tax at source. We observed that the Assessing Officer has also noticed that assessee has deducted TDS and respective deductees have not filed their return of income. Since, deductees have not filed theirbreturn of income, the Assessing Officer came to the conclusion that the genuineness of the transactions are not proved. With the above observations, the Assessing Officer has not made any verification of the transactions and proceeded to disallow the whole amount of expenditure claimed by the assessee, however, we observed that the Ld. CIT(A) has acknowledged the transactions and partly allowed by referring to first page of the Explanation submitted by the assessee and restricted the claim of the assessee to the extent of the information submitted before him/ to the extent observed by him. Ho....
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....TD 286,965 5,740 16 BGAPS6780G PRADEEP SINGH 266,669 2,666 17 AAACB0446L BLUE DART EXPRESS LIMITED 253,486 5,070 18 AGFS2918J SRI PROGRESSIVE PROJECTS 221,000 4,420 19 AAJPT0798H SS4 SAFENET 209,000 2,090 20 AKYPG6367L OMEGA BUSINESS SYSTEM 205,016 2,051 21 AHPPD1797H ROYAL INDIA SECURITAUS 204,656 2,047 22 AAEPD1891Q RAGHURAJ DAYAL 145,959 2,433 23 AALCS4687F SHIVA PROTECTION FORCE PRIVATE LIMITED 144,000 2,880 24 CPKPM5081A DHANANJAY MOHAPATRA 126,618 1,266 25 AAACN6345A NITCO LOGISTICS PRIVATE LIMITED 125,601 2,512 26 AJZPK3097P NEW NICE CARRIER OF INDIA 120,900 1,209 27 AAACL7317C LDS GUARDING SOLUTION PVT LTD 120,000 2,400 28 EJRPS3542B LAX Ml SECURITY GUARD SERVICES 118,850 1,189 29 ANSPK0563D LOKESH KUMAR 107,633 1,077 30 AABCD1439Q DHANAWAT CLEARING AND CARRIERS PVT LTD 90,366 1,809 31 CVGPS0426M ARTH PACKERS 89,700 897 32 AAACI9505M INSIGHT INDIA PRIVATE LIMITED 87,424 1,749 33 BKZPD7519M ANIRUDH....
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....on record and also audited books of accounts were submitted by the assessee before the tax authorities. When the assessee has submitted all the relevant information relating to payments made to various deductees and submitted before the lower authorities and such explained expenditures cannot be treated and termed as unexplained expenditure u/s 69C of the Act. 12. As per the criteria for selection of this case is to verify the deductees who have not filed their return of income. In order to verify the same, AO can verify the transaction to establish the genuineness of the transaction and cannot be treated as unexplained expenditure, as held by Hon'ble Delhi High Court in case of CIT-V v. M/S RADHIKA CREATION (supra) as under: "5. Insofar as the first aspect of the matter is concerned, we find that Section 69C clearly stipulates that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about the source of such expenditure or part thereof", or the explanation, if it is offered by him, is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, ....